Happy new year! Let's kick off 2010 by re-examining my enthusiasm for China. Growth certainly looks healthy at first glance:
Let's bear in mind that China massages its production numbers. The real numbers - in real estate - show China clearly getting into bubble territory:
How do you say "Flip That House" in Mandarin? Sometime before the end of Q1 I'm going to sell a bit more of my FXI and take some profits. It had a nice run in 2009 and China still has potential in the long run. The problem is that bubble-up economic madness drives equity valuations up a wall. Americans learned this lesson all too well over the last few years. Chinese investors will learn it soon enough.
The Purchasing Managers’ Index climbed to a seasonally adjusted 56.6, the Federation of Logistics and Purchasing said today in an e-mailed statement in Beijing. That compares with 55.2 in November and the median 55.4 estimate in a Bloomberg News survey of seven economists.
Let's bear in mind that China massages its production numbers. The real numbers - in real estate - show China clearly getting into bubble territory:
And jump they have. In Shanghai, prices for high-end real estate were up 54 percent through September, to $500 per square foot. In November alone, housing prices in 70 major cities rose 5.7 percent, while housing starts nationwide rose a staggering 194 percent. The real estate rush is fueling fears of a bubble that could burst later in 2010, devastating homeowners, banks, developers, stock markets, and local governments.
How do you say "Flip That House" in Mandarin? Sometime before the end of Q1 I'm going to sell a bit more of my FXI and take some profits. It had a nice run in 2009 and China still has potential in the long run. The problem is that bubble-up economic madness drives equity valuations up a wall. Americans learned this lesson all too well over the last few years. Chinese investors will learn it soon enough.